IJSRP, Volume 4, Issue 10, October 2014 Edition [ISSN 2250-3153]
George Munene Macharia, Ondabu Ibrahim Tirimba
Abstract:
This paper reviews literature of the Gambler’s and the hot hand fallacies and the possible differences inherent in explaining investor behaviour. The Gambler’s fallacy is built on the belief that the more you lose, the higher your next probability of winning in the near future; whereas the hot hand is built on the belief that the more the chances you get right now, the more likely you will get right even in the future. This beliefs are erroneous since they go contrary to the equal chances attributed to the probability of flipping a fair coin according to laws of probability.